10-K
1
f10k2020_mysizeinc.htm
ANNUAL REPORT
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year
ended December 31, 2020
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition
period from ________ to _________
Commission file number
001-37370
MY SIZE, INC.
(Exact name of registrant
as specified in charter)
(Address of principal executive offices) (Zip code)
+972-3- 6009030
(Registrant’s
telephone number, including area code)
Securities registered
pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share MYSZ The Nasdaq Capital Market
Securities registered
pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant
is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller Reporting Company ☒
Emerging Growth Company ☐
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
The aggregate market value of voting and
non-voting common equity held by non-affiliates of the registrant as of June 30, 2020, the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately $7,666,806.
Number of shares of common stock outstanding
as of March 26, 2021 was 12,145,547.
Documents Incorporated by Reference: None.
Table of Contents
Part I
Item 1. Business 2
Item 1A. Risk Factors 14
Item 1B. Unresolved Staff Comments 34
Item 2. Properties 34
Item 3. Legal Proceedings 34
Item 4. Mine Safety Disclosures 34
Part II
Item 6. Selected Financial Data 35
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 40
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 41
Item 9B. Other Information 41
Part III
Item 10. Directors, Executive Officers and Corporate Governance 42
Item 11. Executive Compensation 46
Item 14. Principal Accounting Fees and Services 51
Part IV
Item 15. Exhibits, Financial Statement Schedules 52
Signatures 54
i
PART I
In this Annual Report
on Form 10-K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the
Company” refer to MySize, Inc., a Delaware corporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as
a whole.
References to “U.S.
dollars” and “$” are to currency of the United States of America, and references to “NIS” are to
New Israeli Shekels. Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form
10-K for the year ended on December 31, 2020 are translated using the rate of NIS 3.2150 to $1.00.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
This Annual Report
on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act. Any statements in Annual Report on Form 10-K about our expectations, beliefs, plans, objectives, assumptions
or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not
always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,”
“estimate,” “intend,” “plan” and “would.” For example, statements concerning financial
condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management,
markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking
statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause
actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance
or achievements expressed or implied by any forward-looking statement.
Any forward-looking
statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10-K.
Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections
contained in the forward-looking statements include but are not limited to:
● risks related to our ability to continue as a going concern;
● risks related to the COVID-19 pandemic;
● the new and unproven nature of the measurement technology markets;
● our ability to achieve customer adoption of our products;
● our ability to enhance our brand and increase market awareness;
● the success of our strategic relationships with third parties;
● information technology system failures or breaches of our network security;
● competition from competitors;
1
● our reliance on key members of our management team;
● current or future litigation; and
● the impact of the political and security situation in Israel on our business.
The foregoing list
sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements. You should read this Annual Report on Form 10-K and the documents that we reference herein and have filed as exhibits
to the Annual Report on Form 10-K, completely and with the understanding that our actual future results may be materially different
from what we expect. You should assume that the information appearing in this Annual Report on Form 10-K is accurate as
of the date hereof. Because the risk factors referred to in this Annual Report on Form 10-K, could cause actual results
or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should
not place undue reliance on any forward-looking statements.
Further, any forward-looking
statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In
addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of
the information presented in this Annual Report on Form 10-K, and particularly our forward-looking statements, by these cautionary
statements.
ITEM 1. BUSINESS
Overview
We are a creator of
mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,
including the e-commerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated
algorithms within our proprietary technology, we can calculate and record measurements in a variety of novel ways, and most importantly,
increase revenue for businesses across the globe.
Our solutions can
be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,
the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then
automatically sent to a cloud-based server where the dimensions are calculated through our proprietary algorithms, and the accurate
measurements (+ or - 2 centimeters) are then sent back to the user’s mobile device. We believe that the commercial applications
for this technology are significant in many areas.
Currently, we are
mainly focusing on the e-commerce fashion/apparel industry. In addition, our solutions address the shipping/parcel and DIY uses
markets.
We are in the commercialization phase of our products, although
we have only generated minimal revenues to date. While we rollout our products to major retailers and apparel companies, there
is a lead time for new customers to ramp up before we can recognize revenue. This lead time varies between customers, especially
when the customer is a tier 1 retailer, where the integration process may take longer. Generally, first we integrate our product
into a customer’s online platform, which is followed by piloting and implementation, and, assuming we are successful, commercial
roll-out, all of which takes time before we expect it to impact our financial results in a meaningful way. While we have begun
generating initial sales revenue, we do not expect to generate meaningful revenue during the upcoming quarters. In addition, the
COVID-19 pandemic has had a particularly adverse impact on the retail industry and this has resulted in an adverse impact on our
marketing and sales activities. For example, we have three ongoing pilots with international retailers that have been halted, we
are unable to participate physically in industry conferences, our ability to meet with potential customers is limited and in certain
instances sales processes have been delayed or cancelled. Because of the numerous risks and uncertainties associated with the COVID-19
pandemic, the success of our market penetration and our dependence on the extent to which MySizeID is adopted and utilized, we
are unable to predict the extent to which we will recognize revenue. We may be unable to successfully develop or market any of
our current or proposed products or technologies, those products or technologies may not generate any revenues, and any revenues
generated may not be sufficient for us to become profitable or thereafter maintain profitability.
2
Our Solution
Our cloud-based software
platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry, logistics
and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate
and record measurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address
the need for highly accurate measurements in a variety of consumer friendly, every day uses.
The following are
some select key features:
Our Growth Strategy
We intend to drive
revenue primarily through penetration of the U.S. market through a B2B2C model in the verticals we are targeting. We intend to
pursue the following growth strategies:
3
The Markets
The mass adoption
of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarily
brick-and-mortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project –
have now shifted to digital, as consumers prefer the convenience of shopping anywhere, anytime.
E-commerce’s meteoric rise has been a boon to retailers
who can offer shoppers a simple customer experience through desktop or mobile devices. Retail e-commerce sales worldwide for 2019
were estimated to be $3.5 trillion and forecast to grow to $6.5 trillion in 2022. While many sectors have found ways to increase
revenue through e-commerce, e-commerce is still plagued by issues that cut into profits and negatively impact the bottom line,
such as customer returns, low consumer conversion, and associated restocking and shipping costs.
Fashion/Apparel
The fashion market
is one of the fastest growing sectors of online retail – what was already estimated to be an approximately $525 billion market
in 2019 and is projected to increase to over $1,003 billion by the end of 2025. However, conveniences of online shopping, including
simple search filters, the ability to purchase apparel without trying it on, and free returns, have led consumers to a more free-wheeling
buying style that is costing retailers major dollars.
One of the biggest
causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they
need or ordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. The value of e-commerce
items returned in the U.S. was estimated to be $121 billion in 2017 and expected to reach to $348 billion in 2023.
To address this issue,
we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to
generate highly accurate measurements of their body to find proper fitting clothes and accessories, through the use of our App
on their mobile phone or through a simple questionnaire if the user decide not to download the app. MySizeID syncs the
user’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application,
and only presents items for purchase that match their measurements to ensure a correct fit. MySizeID is available for license
by retailers and download by consumers on both iOS and Android operating systems.
During 2020, MySizeID delivered over 12 million size recommendations.
Shipping/Parcel
According to Pitney
Bowes, parcel revenue in 13 major countries around the world increased by 9% year over year from $323 billion in 2018 (reflecting
87.5 billion parcels) to $351 billion in 2019 or 103 billion parcels. In the shipping/parcel industry, the dimensions of a package
are critical. It is not merely the measurement of a package or box – but rather the amount of space that the package or box
will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often, retailers use unfit packaging
for their items, adding additional costs in materials and shipping fees.
4
To address this issue
for shipping companies, we have developed an innovative mobile technology known as BoxSize. BoxSize enables customers
to quickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies
a variety of precise logistical data for more efficiently managing their supply chain, providing them with an accurate way to
compare the physical package with what is in the shipping manifest. BoxSize solution is available for license on both iOS
and Android operating systems.
BoxSize is
available on the Honeywell Marketplace and in August 2019 was approved for Honeywell’s Independent Software Vendor Program,
and MySize was granted an independent software vendor (ISV) status on the Zebra Technologies and on DataLogic platforms.
DIY
Similar to issues
in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit and
measurements. In an industry where precise measurement for projects is an absolute necessity, e-commerce has not grown as quickly
as in other industries which we believe is due to lack of consumer confidence in measurements at home and buying the correct item
online.
To address this issue for retailers, we have developed an innovative
mobile technology known as SizeUp. SizeUp is a digital tape measure that allows users to measure length, width and
height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a value-add for DIY
and home improvement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their
homes or projects due to inaccurate measurements. SizeUp also is designed to replace rulers, tape measures and other measuring
tools used for DIY projects. SizeUp is available for consumer download on both iOS and Android operating systems, with more
than 1,210,600 consumer downloads to date.
MySizeID
We have released the
MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in
order to size clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application
is that it simplifies the process of purchasing clothes online and significantly reduces the rate of returns of ill-fitting clothing.
The application is
the result of a research and development effort that combines:
MySizeID allows
consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online
retailers, to ensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based
on the use of existing sensors in smart phones which enable, through a specific purpose application, the measurement of the body
of any consumer by moving the smartphone phone along his or her body. The MySizeID application does not rely on user photographs
or any additional hardware; all a user needs to do is scan their body with their smartphone and the application records their
measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various
retailer websites without worrying about size. When a search is made, the retailer will connect to our cloud database, and then
provide results based on the user’s measurements and other parameters as he or she may have defined. This data is also saved
for use when a customer enters a brick and mortar store to help serve the customer more efficiently and to provide a better shopping
experience.
5
Figure 1: Screenshot of MySizeID on
smartphone and e-commerce website
As part of the integration
process, we offer to the retailer three main components:
During 2020, we released a ‘Made 2 Measure’ feature
for MySizeID which allows retailers to receive a custom body measurement instead of a size to make a custom made clothing. We also
developed and released a contact less shopping feature that enables consumers to scan a barcode through the MySizeID app when they
are in the brick and mortar store to make a purchase completely free of contact.
Moreover we have released MySizeID
app 2.0 version features a simpler onboarding experience with video tutorials focusing on a personalized consumer shopping experience.
In addition, we recently announced the full integration of our
e-commerce shoe sizing solution directly to retailers’ websites and plan to introduce a 3D try-on avatar feature in the fourth
quarter of 2021. Furthermore, we recently announced a planned launch of an application for the Evropeyskiy Mall in Russia which
is designed to streamline in-person shopping from browsing to point of sale.
The widget has two features:
Manual mode – which
allows the user to obtain size from the following parameters: gender, height and weight only. Thus we are able to give a size
estimation even without having all the measurements made with the app.
6
Guest mode - allows a user that does
not wish to sign up to MySizeID as a user, to obtain size recommendations as well.
Figure 2: Screenshot of MySizeID widget
on Modelista website
Another feature we
added is the in between sizing feature. Our system can detect a user that has body dimensions that place the user between sizes
and lets the user know that. That way a user can choose between the two sizes according to the user’s fit preference (tight/loose/average).
7
Figure 3: Screenshot of Back-Office
System
As we are licensing
the technology, we are currently offering MySizeID to retailers on a pay per use basis and a monthly subscription fee.
In a pay per use business model, every time the consumer obtains a recommended size, we charge the retailer for the usage.
In addition, we have developed applications for third party
ecommerce platforms so that retailers who use those platforms will find our application on the platform’s app store and will
be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing
the Shopify platform. Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the
simple integration of the MySizeID widget on their site. During 2019 we also released applications for Lightspeed
and for WooCommerce which are the biggest ecommerce platform in the market allowing more retailers to easily integrate and use
the MySizeID solution. In 2020, we integrated MySizeID with Sellers Commerce a US uniform platform, ZeroGrey, and Italian
Kooomo platform partner, Kaya Consulting,
BoxSize
BoxSize is
an intuitive parcel measurement application that can provide real-time logistic data on package volumes and transportation, resulting
in improved operational efficiency and reduced operating expenses. In addition, BoxSize allows customers to easily measure
the size of their parcel with their smartphone, calculate shipping costs and arrange for a convenient pick-up time for the package.
In 2018, we released BoxSize for Android which has a greater market opportunity since, based on our experience, most courier
companies are using Android based handheld devices. As a result, BoxSize is available both on iOS and Android.
In 2020 released the
“One Click” feature that enables the user to measure a package with just one swipe of the handheld device, instead
of taking three separate measurements.
8
Figure 4: Screenshot of BoxSize
We have developed
the “Two Shots”, an algorithm that is intended to make package measurement even faster through two measurements, to
measure the height, width and depth, of a package rather than three separate measurements.
We announced the general
availability of BoxSize mobile measurement solution on the Honeywell Marketplace. In addition, BoxSize was approved for Honeywell’s
Global Vendor Program BoxSize and is now available to provide highly accurate mobile measurement solutions for thousands of Honeywell
clients. We also developed a new dashboard for the courier companies to have all the required data about each package in one place.
It includes package dimensions, pictures, scan geo location and more. The dashboard also let the courier use Webhooks, which allows
him to get the information from his own system.
In 2020, we announced
our partnership with Datalogic, a global leader in the automatic data capture and process automation markets. The partnership
makes our BoxSize measurement solution available to thousands of Datalogic customers in the Transportation and Logistics vertical.
Agreement with Katz Delivery Services,
LTD
On November 20, 2015,
we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in
Israel. Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology
with the Katz ERP to accurately monitor the volume of all parcels delivered to it for shipment by its clients. The goal is for
Katz to use our technology to help with planning its distribution routes, thus reducing operational costs by adjusting the distribution
vehicles to the volume of the shipments.
KatzID was
developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users
to scan the barcode of a package and measure the package dimensions using MySize’s SizeIT technology (described below)
and then subsequently upload the information directly to Katz’s back office. The technology is being used to control package
volumes and accurately charge Katz’ customers accordingly.
In September 2018,
we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a software-as-a-service basis KatzID
for a monthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP
system. To date, there have been no material revenues from this agreement.
9
SizeUp
We are working on additional
consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for the business
to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with
an accuracy of plus or minus 2 centimeters. Through the use of this application users will be able to visualize how an object or
a piece of furniture will fit in an existing room in their home or office. As many people have difficulty with spatial recognition,
we hope this will help alleviate the problem. During 2020, we expanded availability of SizeUp to more than 68 different
iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and title
suggestions. As of March 1, 2021, there have been over 1,210,600 downloads of the SizeUp app.
Currently the SizeUp
app for Android and iOS is available for free for the first 30 days, after which a user will be required to register via e-mail
and pay a one-time fee of $1.99 to continue using the application. To date, revenues from downloads have been minimal.
SizeIT
We have developed
SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to
instantly and accurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind
MySizeID, SizeUp, and BoxSize applications, can be embedded into any company’s existing or white label
mobile app in a short period of time, offering an efficient solution to the escalating costs associated with product sizing issues
and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another
side of the object. Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.
A new graphical SizeIT
SDK was developed to make it easier and faster to implement the SDK for users who would like to avoid developing their own
graphical user interface.
Research and Development
Our research and development
team is responsible for the research, algorithm, design, development, and testing of all aspects of our measurement platform technology.
We invest in these efforts to continuously improve, innovate, and add new features to our solutions.
We incurred research and development expenses of approximately
$1.5 million in 2020 and $1.5 million in 2019, relating to the development of its applications and technologies. We intend to continue
to invest in our research and development capabilities to extend our platform and bring our measurement technology to a broader
range of applications.
Sales and Marketing
In 2019, we launched a commercialization strategy that directs
our sales efforts toward both sales to e-commerce players in specific vertical markets such as fashion/apparel and shipping/delivery
as well as to e-commerce third party platform providers. As of March 26, 2021, we have nine sales offices in the following countries:
US, UK, France, Netherlands, Turkey, Russia, Germany, Israel and Italy, generating customer leads, building out a sales pipeline,
and developing customer relationships.
We believe an effective
method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of
one or more of our products in order to successfully convert those accounts to paid subscriptions.
Proprietary Rights
We rely on a combination
of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractual protections,
to protect our proprietary technology.
10
As of December 31,
2020, we owned ten issued patents three in each of Russia and the US and one each in Canada, Japan and Israel which expire between
January 20, 2033 and August 18, 2036, and we have eight additional patent applications in process. As of such date, we do not have
any registered trademarks.
We cannot provide
any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,
enforceability and type of protection of proprietary rights in software-related industries are uncertain and still evolving.
Despite our efforts
to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the
extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition,
the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States,
and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions. Our means
of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights
by others.
Further, in recent
years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly
in the software and Internet-related industries. We can become subject to intellectual property infringement claims as the number
of our competitors grows and our products and services overlap with competitive offerings. These claims, even if not meritorious,
could be expensive to defend and could divert management’s attention from operating our business. If we become liable to
third parties for infringing their intellectual property rights, we could be required to pay a substantial award of damages and
to develop non-infringing technology, obtain a license or cease selling the products that contain the infringing intellectual
property. We may be unable to develop non-infringing technology or obtain a license on commercially reasonable terms, if at all.
Government Regulation
We
are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and
regulations may involve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to
which we are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business.
In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and
rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolve rapidly,
it is possible that we, our products, or our platform may not be, or may not have been, compliant with each such applicable law
or regulation.
In
particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal
data. Many U.S. states have passed laws requiring notification to data subjects when there is a security breach of personally
identifiable data. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative
bodies and foreign governments concerning data protection. In addition, data protection laws in Europe and other jurisdictions
outside the United States can be more restrictive than those within the United States, and the interpretation and application
of these laws are still uncertain and in flux.
For
example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations
for entities that process personal data about individuals, including obligations to cooperate with European data protection authorities,
implement security measures and keep records of personal data processing activities. Noncompliance with the GDPR can trigger fines
equal to the greater of €20 million or 4% of global annual revenue. In addition, the California Consumer Privacy Act
of 2018, or CCPA, effective as of January 1, 2020, gives California residents expanded rights to access and require deletion of
their personal information, opt out of certain personal information sharing, and receive detailed information about how their
personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data
breaches, that is expected to increase data breach litigation. Further, failure to comply with the Israeli Privacy Protection
Law of 1981, and its regulations, as well as the guidelines of the Israeli Privacy Protection Authority, may expose us to administrative
fines, civil claims (including class actions) and in certain cases criminal liability. Current pending legislation may result
in a change of the current enforcement measures and sanctions. Given the breadth and depth of changes in data protection obligations,
meeting the requirements of GDPR and other applicable laws and regulations has required significant time and resources, including
a review of our technology and systems currently in use against the requirements of GDPR and other applicable laws and regulations.
We have taken various steps to prepare for complying with GDPR and other applicable laws and regulations however there can be
no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’
implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply
with GDPR or other applicable laws and regulations are not successful, we may be subject to penalties and fines that would adversely
impact our business and results of operations, and our ability to use personal data of individuals could be significantly impaired.
11
Competition
We operate in a highly
competitive industry that is characterized by constant change and innovation. Changes in the applications and the programing languages
used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our
competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, Smart Measure and 3DLook.
The principal competitive factors in our
market include the following:
● Digital operations expertise;
● Ease of use of products and platform capabilities;
● Total cost of ownership;
● Adherence to industry standards and certifications;
● Strength of sales and marketing efforts;
● Brand awareness and reputation; and
● Focus on customer success.
We believe we generally
compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established and
emerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We
expect this to be particularly true as we are a smartphone-based offering that does not need to utilize the smartphone’s
camera, and our competitors may also seek to repurpose their existing offerings to provide similar solutions. Many of our competitors
have substantially greater financial, technical, and other resources, greater name recognition, larger sales and marketing budgets,
broader distribution, and larger and more mature intellectual property portfolios.
Human Capital Management
As of March 26, 2021,
we had a total of 27 employees, of which 24 were full-time employees, including 7 in sales and marketing, 13 in technology and
development and 4 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor
have we experienced any work stoppage. We consider our relationship with our employees to be good. Our future success depends on
our continuing ability to attract and retain highly qualified engineers, sales and marketing, account management, and senior management
personnel.
We believe that our
future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel. In particular, we
depend on the skills, experience and performance of our senior management and research personnel. We compete for qualified personnel
with other medical device, biotechnology, pharmaceutical and healthcare companies, as well as universities and non-profit research
institutions.
12
We provide competitive
compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs (which vary
by country/region and employment classification) include incentive compensation plan, pension, healthcare and insurance benefits,
paid time off, family leave, and on-site services, among others. We also use targeted equity-based grants with vesting conditions
to facilitate retention of personnel, particularly for our key employees.
The success of our
business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of
our employees. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest
of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes
having employees work from home, while implementing additional safety measures for employees continuing critical on-site work.
We consider our relations
with our employees to be good.
Company Information
Our principal executive
offices are located at 4 Hayarden St., POB 1026, Airport City, Israel 7010000, and our telephone number is +972-3-600-9030. Our
website address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is
not incorporated by reference into, nor is it in any way a part of, this Annual Report on Form 10-K.
We use our website
(www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may be deemed
material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public
conference calls and webcasts. The contents of our website are not, however, a part of this Annual Report on Form 10-K.
Corporate History
We were incorporated
in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name to Knowledgetree
Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc. In 2020, we created a subsidiary in the Russian
Federation, My Size LLC.
From inception through
2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology for interventional
cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012,
we acquired Metamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative
solutions for the rehabilitation of tissues, particularly skin tissues. By the end of 2012, we ceased operations and in January
2013, we sold our entire ownership interest in Metamorefix.
In September 2013,
Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch, according to which Mr. Luzon
purchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and
outstanding capital stock of the Company at such time, thus becoming a controlling shareholder of the Company. In connection with
the acquisition, Mr. Luzon reached a settlement with our then creditors pursuant to which the main creditor, Mr. Shmuelevitch,
was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any and all his claims that he
may have relating to any monetary indebtedness of the Company to the creditors.
In February 2014,
My Size Israel 2014 Ltd., or My Size Israel, our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement,
with Shoshana Zigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect
to the acquisition by us of certain rights related to the collection of data for measurement purposes including rights in the
venture, the method and a patent application that had been filed by the Seller (PCT/IL2013/050056), or the Assets. In consideration
for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectly connected with the
Assets together with value-added tax in accordance with the law for a period of seven years from the end of the development period
of the aforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements,
knowledge and know-how developed and/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further,
the Seller agreed not to compete, directly or indirectly, with us in any matter relating to the Assets for a period of seven years
from the end of the development period of the venture.
13
The Purchase Agreement may be terminated by either party in
the event of an uncured material breach. The Purchase Agreement further provides that the Seller is entitled to repurchase the
Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b)
if on the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly
derived from the Assets is less than NIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase
Event occurs, the Seller shall have a 90 day right, subject to delivery of written notice to us of Seller’s intention to
exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined
by one or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase
the Assets, the Seller shall be obligated to repurchase the Assets within 60 days from the date of receipt of the appraisal. Seller
shall have the right to retract its intention to repurchase the Assets, provided Seller gives written notice to us within 30 days
of receiving the appraisal and subject to the Seller refunding to us the expenses borne by us in respect of the appraisal. As of
the date of this Annual Report on Form 10-K, we have only generated limited revenue and as a consequence of the passage of seven
years since execution of the Purchase Agreement, the Seller, has a right to repurchase the Assets for 90 days from February 16,
2021. In accordance with the Purchase Agreement, on March 7, 2021, we notified Ms. Zigdon that the amount of our income, directly
and/or indirectly derived from the Assets is less than NIS 3.6 million. We intend to negotiate the waiver of the Seller’s
right to repurchase of the Assets and in consideration of such waiver expect to pay cash or issue shares of common stock and/or
common stock equivalents, or a combination of both. At this stage, we are unable to estimate the amount or form of consideration
that we will expect to pay in consideration of the waiver. To the extent that we pay cash, this could materially reduce the amount
of cash available for working capital and other purposes and to the extent we issue any equity this could result in substantial
dilution to you and our then current stockholders. If the Seller exercises her right to repurchase the Assets, our ability to develop
and commercialize our products would be significantly harmed and we may cease operations.
In September 2005,
we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with the SEC.
In August 2012, we suspended our reporting obligations. In mid-2015 we resumed reporting as a public company. On July 25,
2016, our common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.
ITEM 1A. RISK FACTORS
An investment in our
common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information
in this Annual Report on Form 10-K before investing in our common stock. Our business and results of operations could be seriously
harmed by any of the following risks. The risks set out below are not the only risks we face. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial
condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations
could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may
lose all or part of your investment.
Summary Risk Factors
The
principal factors and uncertainties that make investing in our ordinary shares risky, include, among others:
Risks Related
to Our Financial Position and Capital Requirements
Risks Related
to Our Company and Our Business
● We may never successfully develop any products or generate revenues.
14
● Our business may be adversely affected by the impact of the COVID-19 pandemic.
15
Risks Related To Our Operations In
Israel
Risks Related To Our Common Stock
Risks Related to Our Financial Position
and Capital Requirements
We have historically
incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.
We realized a net
loss of approximately $6.2 million and $5.5 million for the years ended December 31, 2020 and 2019 and had an accumulated deficit
of $34.7 million as at December 31, 2020. Because of the numerous risks and uncertainties associated with the development of our
products and business, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
Expected future operating losses will have an adverse effect on our cash resources, shareholders’ equity and working capital.
Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital, expand
our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose
all or part of your investment in us.
Our limited operating history makes
it difficult to evaluate our business and prospects.
We have only been
developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research and
development, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate
our business and prospects. We have not yet demonstrated an ability to commercialize our products. Consequently, any predictions